American rocketeers are attempting to reclaim a share of the lucrative satellite launch market from foreign firms. To win, they're rewriting the rules and ushering in a new era of the space industry.

Kourou, French Guiana—On a viewing platform 3 miles away from the launchpad, Clay Mowry can see the flash of fire and plume of smoke under Ariane 5 before he hears the boom of its ignition. But when the sound waves arrive, they more than rumble air around Mowry's ears—they vibrate his internal organs.

The 165-foot-tall rocket parts the air in front of its tip with a violent ripping sound; a setting sun gives its billowing trail of smoke a lustrous orange fringe. Mowry, president of the U.S. subsidiary of the European launch company Arianespace, cranes his head to watch the rocket soar from this equatorial spaceport, located on the northeastern coast of South America. But his attention is divided between the rocket and his customer, communications mogul Charlie Ergen. The co-founder of Dish Network is standing nearby, flanked by his wife and three of their children, all turning their heads in unison to watch the launch vehicle streak over the Atlantic. It's an oddly intimate family moment.

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Ergen, No. 106 on Forbes's list of global billionaires, is famous for being a former professional poker player as well as serving as chairman of Dish Network and EchoStar. His face is surprisingly calm considering what's at stake: It's his $250 million satellite that's being violently blasted out of Earth's gravity well, loaded in the tip of a rocket that cost him another $270 million. The only hint of nerves during this July launch is found in his sandals—Ergen repeatedly transfers weight from one foot to the other.

The primary payload for this launch is the 13,500-pound EchoStar 17, one of the biggest communications sats ever built. (A small European weather sat is sharing the ride.) When placed in geosynchronous orbit—where the satellite can remain in position over one spot on Earth—EchoStar 17 will direct 60 beams that deliver download speeds of more than 100 gigabits per second to millions of Ergen's customers across half of the continental United States. The satellite should recoup the cost of manufacture and launch in just a few months.

Mowry's company is playing a longer game, for even higher stakes. A crash, a delay, or incorrect orbital placement would result in cancellations, design reviews, and lost orders. And these days there is plenty of competition. Ergen is known to shop for launch providers: He's hired Russian, Chinese, and Swiss firms to loft his communications birds. For Mowry, a routine launch is engineering nirvana. "We love the word nominal," he says after hearing a positive report from mission control.

The rocket shrinks in the sky from a gleaming white tube to a pinprick of light 40 miles high. Under binoculars, the single bright point divides into three. Twin dying embers fall away from the still-bright central speck—the empty solid-fuel boosters have detached. Moments later the clear weather enables the rarest spectacle of a launch: The light divides again as the fairing at the rocket's tip that houses the payload opens and falls away in a short-lived glimmer. "That's great, it's really rare to see that," Mowry says, grinning.

But Ergen does not smile. The safety of his sat is not ensured until it separates from the rocket's upper-stage payload bay. Viewers turn their attention to TV screens mounted at the viewing platform. Twenty tense minutes pass; Mowry fills the time by explaining to Ergen's daughter's boyfriend how Earth's spin at the equator helps boost hundreds of extra payload pounds into orbit.

At 27 minutes, word comes in: About 600 miles up, a little north of Australia, a clamp band opens, and springs around the upper ring push the satellite away from the adapter. Sat sep is confirmed. "Good job, boys," Ergen says, clapping. Then he reins it in. There is another team nearby waiting to hear if their weather satellite is safely away. Minutes later its release is confirmed, and the celebration begins.

That evening's party at the Ergens' hotel in Kourou includes carved meats, rum, seafood, fine wine, and, after dessert, Cuban cigars on the beach deck. Ergen talks about his family roots in Oak Ridge, Tenn., and receives reports on his satellite's health.

This is Arianespace's 49th consecutive successful Ariane 5 launch, and this reliability has made the company a powerhouse in the increasingly competitive space industry. An all-expenses-paid spaceport, government-supported insurance, and infusions of cash from a score of European nations help too. Arianespace gets $130 million a year from the European Space Agency (ESA) just to balance its books.

Most Americans don't know it, but the majority of the satellite services they enjoy use hardware lofted by European Union rockets. (The big exception is GPS, which is operated by the U.S. Air Force.) Nearly half of American-owned commercial satellites are launched from the EU spaceport in Kourou.

French Guiana's isolated jungle spaceport is not the only place where nations launch private-sector sats. Russia and China offer their services on the open market, and government-backed newcomers in Japan and India promise more competition ahead.

But in the U.S. something different is happening: Private companies, lightly subsidized by the U.S. government but operating on their own, are entering the commercial launch industry. If these U.S. upstarts succeed, they could drive prices down and use Earth's orbit to connect remote areas, empower personal electronics, and create high-tech jobs.

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This is the 21st century's space race—one you've probably never heard of.

Spectators were weeping at Cape Canaveral, Fla., as the space shuttle Atlantis rose on the program's last mission in July 2011, one year before EchoStar 17 reached orbit. It was a glorious midmorning launch—the spacecraft soared through a break in the rain clouds, carrying supplies to keep the International Space Station (ISS) operational through 2012.

Crying seemed appropriate in 2011—the shuttle's retirement was the most visible sign of America's waning status as the leading spacefaring nation. Crews at Canaveral were dismantling launchpads and readying retired shuttles for museums.

And that year, no American spaceports launched any commercial sats despite a healthy global demand—2011 marked the fifth straight year of growth, with annual sales of nearly $180 billion. The industry was completely dominated by government-backed launcher-providers from Russia, Europe, and (to a lesser extent) China.

The Cape still hosts rockets. United Launch Alliance (ULA), a joint venture by aerospace giants Lockheed Martin and Boeing, launches government satellites and space probes. But ULA's focus on the U.S. government leaves little room—or inclination—to offer rides for commercial sats. And the $270 million-per-launch price tag is not luring customers away from Russian or European providers.

Things look different at Cape Canaveral in 2013. The historic spaceport is becoming something else for America—a roost for new companies with dreams of reaching orbit. As buildings dedicated to the shuttle empty, private space companies such as Sierra Nevada and Space Exploration Technologies (SpaceX) are moving to the Cape. The existing spaceport hosts the two companies, but as more show interest, the state of Florida is seeking to build a new spaceport adjacent to the federal facilities. The new port would be built to spec and would alleviate the conflicting schedules of Air Force and commercial launches. (Pentagon launches come first.)

Private space firms design their own hardware and operate their own control centers. It's a new business model that only the United States is embracing.

Most entrants in the industry are private space entrepreneurs who are sinking personal fortunes into satellite launch systems. These self-made kingpins can tolerate the steep startup costs; they also believe that their willingness to innovate gives them the edge over established national space programs.

Richard Branson last year announced that Virgin Galactic is adapting its LauncherOne airplane to deliver sats by launching rockets at high altitudes. Virgin's proposed base of operations: Cape Canaveral. Another batch of well-heeled investors, including Microsoft co-founder Paul Allen and famed aerospace designer Burt Rutan, formed a company ("Stratolaunch," April 2012) to operate a massive, space-rocket-ferrying aircraft from the Cape.

Leading the pack is SpaceX, the status-quo-shattering company founded by Internet billionaire Elon Musk. Best known for its successful 2012 missions to the International Space Station, SpaceX has broken the ULA's monopoly on government launches by winning two contracts in late 2012. The launch provider is also selling its services to the private sector—reversing the U.S.'s downward slide of commercial launches by beating Europe, Russia, and China to contracts.

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In fact, commercial launches comprise 70 percent of the company's launch manifest. The bulk of SpaceX's revenue comes from NASA—ISS missions reap more money than satellite launches because they include funds for the design, construction, and operation of spacecraft, as well as for the price of a rocket.

"The two companies I think are extremely well-positioned for the future are Arianespace and SpaceX," says Marco Caceres, an aerospace analyst with the Teal Group. "They are the ones who are the most diversified and have the best pricing." SpaceX offers $160 million launches, about $100 million less than those of Arianespace and ULA.

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A stroll around SpaceX's launchpad at Cape Canaveral, which is leased from the U.S. Air Force, illustrates how new thinking can introduce efficiencies and lower costs. Unlike other launchers, SpaceX assembles its rockets horizontally, so it does not require massive vertical assembly buildings like the ones found elsewhere at the Cape and in French Guiana. In French Guiana a massive vehicle wheels the upright Arianespace rockets and boosters at a snail's pace between assembly buildings and to the launch site.

SpaceX engineers streamlined the procedures. Their rockets travel to the launchpad in a transporter–erector vehicle; this same vehicle holds the rocket horizontally while crews work on it in a single building. The rocket remains prone as it slides on rails to the launchpad and is only maneuvered upright just before the launch, easing the staff's workload and lowering overhead costs.

The stages of SpaceX's Falcon 9 separate with a mechanical ball-and-socket system instead of using industry-standard explosives. Pyrotechnic charges need to be defused if a launch is canceled. Without such worries, if a launch is delayed, SpaceX can easily lay the rocket down and slide it back into the hangar to fix the problem. This is what happened during the company's first, aborted launch to the ISS last year—the flight occurred days later, not the weeks or longer that such an abort would likely cause other launchers.

SpaceX enjoys an advantage over competitors in the way it procures launch-specific supplies. Established launch providers relied on demand from the shuttle program to control costs. But when the shuttle retired, the prices rose. SpaceX is immune to this—it manufactures most of its hardware in-house. "When I started SpaceX, we were outsourcing almost everything," Musk tells PM. "Over time we insourced more and more. The reason for that is, to the degree that you use legacy components you inherit the legacy cost."

Pressure to Perform

SpaceX has not yet launched a commercial satellite, or anything else, to geosynchronous orbit (higher than low Earth orbit, where the ISS is positioned), but sat owners are willing to give SpaceX a try to introduce competition. "There is no pressure for the Europeans, Chinese, or Russians to bring down their launch costs because they can get whatever they charge," Caceres says. "But now that you've got SpaceX, that's the key to putting downward pressure on the prices. And you should start to see launch costs gradually come down. To me that's going to be their biggest contribution to the industry."

The SpaceX effect is already being felt. Last November French lawmakers responsible for technology investment announced they were backing a plan to speed up the replacement of the Ariane 5. One senator told reporters that SpaceX's "low-cost launcher constitutes a real and serious threat." The upstart American company is being built from scratch to make money: visiting SpaceX's facilities, he said, "is like entering Ikea."

But from the customer's point of view, price is not the most important consideration. "High reliability is necessary to be a commercial player," says Stéphane Gounari, a space analyst with Northern Sky Research group. "Any new contender will have to prove it to enter the market."

SpaceX is learning this the hard way. The company carried a small Orbcomm communications satellite as a secondary payload during a 2012 launch to the ISS, but one of the Falcon 9's engines shut down during launch. The ISS mission was a success, but the rocket released Orbcomm's satellite too low and within four days it fell back to Earth, burning to a cinder during reentry. SpaceX skeptics see inexperience, but the company's supporters note that the rocket worked as planned—one of nine engines shut down after detecting a problem. Its design makes the Falcon 9 the only vehicle that could have delivered anything to space after losing an engine.

The incident could spook the satellite industry—a fact that puts great weight on the results of an ongoing SpaceX/NASA investigation into the engine shutdown. Sat owners are eager for a change, but not so eager that they will put their precious spacecraft at risk. Bob Buschman, senior vice president at sat manufacturer Hughes Network Systems, points out that often "the launch cost is less than the cost of a satellite." Buschman is an industry veteran who knows that having multiple launch options reduces the risk of delays and mishaps. Like all sat owners he wants more players in the launch game. "Arianespace has the best track record, but this is a rough business," he says. "You don't want to count on a single horse."

That need for competition is an opportunity for American companies—one that SpaceX is exploiting. SpaceX officials pride themselves on aggressive scheduling and soaring ambition. The company wants to build its own spaceport by 2017, and has bought property in Texas near Brownsville, scouted locations in Georgia and Florida, and discussed options with Puerto Rico and Hawaii.

"We'd be aiming super-low if we were aiming for the business level of Arianespace," says SpaceX president Gwynne Shotwell. The company plans to double the number of Arianespace launches. Shotwell says the goal is to make rocket launch "more like an aircraft-type operation. We want to change the flavor of the industry."

American Relauch

A healthy U.S. launch industry could create a future that looks like a science-fiction book cover: Rockets blast off across the nation. Spaceports reinvigorate economies; a generation of engineers seizes the opportunity to build flight-ready spacecraft for good pay. Schoolkids in Virginia watch LauncherOne leave the runway, a rocket carrying a communications sat mounted under its twin fuselages; Texans picnic near SpaceX's pad to experience the gut-rattling launch of a Falcon Heavy. Its payload: a private space station with rooms for scientists and tourists.

This spacefaring America resembles the dreams of the 1960s. The players may be changing, but the vision is the same. In this way the space industry is more than a business. It's an unrealized promise.